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An industrial machine tools manufacturer buys parts from a supplier. For a particular part, the monthly demand is expected to average 7 5 0 units.

An industrial machine tools manufacturer buys parts from a supplier. For a particular part, the monthly demand is expected to average 750 units. Ordering is done by phone and is estimated to cost $50, including the cost of a quick parts inventory and payment. The company has determined that its inventory carrying costs are 25% per year. The product is valued at the suppliers facility at $35 each. They charge $3 per part to have them shipped to the manufacturers facility.

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